Major histocompatibility complex (MHC) class I genes encode highly polymorphic transplantation antigens essential for T-cell immune responses. This program addresses how MHC class I genes are regulated during development and by lymphokines. The current emphasis is the analysis of trans-acting regulatory proteins that bind to the cis-acting DNA sequences of the MHC class I gene. Two highly conserved cis-acting regulatory sequences in the 5' upstream region of the class I gene govern developmentally controlled and IFN-induced expression of class I genes. These designated the class I regulatory element (CRE) and interferon consensus sequence (ICS), respectively. By gel mobility shift analyses and methylation interference experiments, we found at least three sequences in the CRE that bind independent nuclear proteins. These three sequences, region I, II, and III correspond to inverted and direct repeats present in the CRE. During fetal stage when MHC class I expression is extremely low, a protein that binds region I is nondetectable, although a protein for region II is present in a large amount. Concomitant with a sharp increase in class I mRNA levels, region I-binding protein becomes detectable at the neonatal stage, denoting a correlation between class I gene expression and the presence of region-I binding protein. We found that IFN treatment induces binding of at least two new proteins to the ICS is induced. These two proteins differ in requirement of de novo protein synthesis. Mutations in the binding region but not in other parts of the ICS abrogate transcriptional enhancement by IFN. A similar motif occurs in other IFN-inducible genes of mouse and human, and they are capable of competing for the proteins that bind the ICS of class I genes. These results indicate that binding of protein to the ICS represents the basic mechanism of IFN-induced transcriptional activation of not only class I but other genes. Finally, in order to dissect functional significance of protein binding to the CRE and ICS, we developed an assay for in vitro transcription of the class I gene. In this assay DNA templates containing the class I upstream region direct class I mRNA synthesis in a cell free condition. This system should allow us to dissect the mechanism of MHC class I transcription in detail.